EXTERNAL PRESSURES WON'T CHANGE CHINA

The oil and gas industry has much at stake in how the world responds to government misbehavior in China. As the Asia-Pacific Report beginning on p. 36 notes, the sole surviving Communist behemoth has become a regional leader in economic growth and oil industry activity. China's economy has expanded at the rate of 8%/year recently--12% last year alone. Growth in the booming southeastern provinces may reach 20%/year. This puts China in league with other go-go Asia-Pacific economies, but

May 10, 1993

3 min read

China's economy has expanded at the rate of 8%/year recently--12% last year alone. Growth in the booming southeastern provinces may reach 20%/year. This puts China in league with other go-go Asia-Pacific economies, but size sets it apart. The country has one fifth of the world's population.

OIL DEMAND RISING

Rising Chinese oil demand is straining processing capacity and the government's insistence on sustaining oil exports. Future demand will depend greatly on construction of roads and other transportation infrastructure. Most estimates see 120,000-140,000 b/d/year oil demand growth for at least several years. Refinery construction is brisk.

And China is further opening its oil industry to foreign capital. The bidding round for Tarim basin exploration rights announced early this year represented a major policy reversal. The government previously excluded foreign companies from the most-promising interior basins. Last month, China's offshore, long open to outside capital, gained a needed lift when Amoco Orient Petroleum Co. and China Offshore Oil Nanhai East announced development plans for deepwater Liuhua 11-1 oil field.

So there's work to be done in China. And work means trade opportunities.

Some countries, though, threaten to use trade to punish Beijing for its transgressions. U.S. lawmakers again propose to hold most-favored nation trade status hostage to improved official behavior. Former President George Bush regularly vetoed such sanctions. President Clinton might not do so. Other countries might follow suit. And the wrong people would be hurt.

It is true that China's ruling class is no charitable organization. If holdout Communism is not evidence of official misbehavior, a wretched human rights record certainly is. And no peace-loving country can cheer reports that China is exporting tools of nuclear weapon construction. But are trade sanctions the way to make Beijing change?

Probably not. The Communist old guard has repelled external pressure in the past and would meet trade sanctions with characteristic intransigence. Domestically, the government has been much more flexible. Before bludgeoning China with trade sanctions, governments elsewhere should ask how a stubbornly Communist nation has managed to produce such impressive economic growth.

Louis E. Azzato, chairman and chief executive officer of Foster Wheeler Corp., has a quick answer. "You have a market economy growing from the bottom up," he said recently in Houston. Notwithstanding a "Communist superstructure," Chinese people enjoy new freedoms, and entrepreneurship is flourishing.

REGIME CHANGING

Much of this progress results from relaxation of official rigidities. Southeast China's prosperity has its roots in special economic zones created in 1979 and growth initiatives since then. Opening of the Tarim basin demonstrates a lumbering adaptability.

Governments elsewhere must not deal with China as yesteryear's proverbial Communist monolith. The Chinese people see prosperity and freedom elsewhere in Asia-Pacific and want the same. The Chinese government is moving, however grudgingly, to accommodate them. Maybe it recognizes something that some outside governments do not: that international politics is easier to resist than the power of human ambition.